Top 5 Standout ETF Launches Of 2017

December 01, 2017

{This article appears in our December issue of ETF Report.]

After almost 25 years of ETFs, you might think issuers would’ve run out of ideas. It hasn’t happened yet, though.

As of the time of writing, nearly 200 new ETFs had launched this year, roughly on par with this same time last year. But there’s no scraping the bottom of the barrel that we can see. This year’s launches prove that although the industry has matured, there’s still plenty of new ground left to break.

We round up five of our favorite standout launches of 2017.

To loyal fans, sponsorships matter. Or so goes the premise of the ProSports Sponsors ETF (FANZ), which invests in companies that sponsor or have broadcasting relationships with four major U.S. sports leagues: the National Football League, the National Basketball Association, Major League Baseball and the National Hockey League.

FANZ banks on the idea that sports watchers are so likely to purchase goods and services from the companies sponsoring their favorite teams that those stocks should see a measurable boost and outpace the broader economy. It’s an intriguing thesis, one that SportsETFs says is backed by plenty of industry research (not to mention decades of advertising dollars).

Unsurprisingly, the bulk of FANZ’s equally weighted portfolio is made up of consumer-oriented companies: Consumer cyclicals comprise 37% of holdings, while technology stocks make up 16% and consumer non-cyclicals account for 15%.

At just $4.2 million in assets, FANZ remains small and illiquid, with sizable spreads and low daily volume. Its exposure doesn’t come cheap, either, with a price tag of 69 basis points.

Still, with principles-based investing making such a huge splash in the market these days, FANZ may yet find its audience. After all, few things in life inspire such devotion and passion in people as sports. Even if FANZ overlooks the true die-hards: soccer fans.

The Point Bridge GOP Stock Tracker ETF (MAGA) isn’t so much about principles as it is politics; specifically, the Republican kind.

Using data from the Federal Election Commission, MAGA screens the S&P 500 Index to pick out companies whose employees and associated political action committees contributed $25,000 or more to national candidates over the past two election cycles.

Stocks are then ranked by the amount of money—both net dollars and percentage—given to Republican candidates versus Democratic ones for the same offices. The top 150 Republican-leaning firms are selected; from there, MAGA’s holdings are equally weighted.

MAGA’s methodology makes it more of a barometer for shifting political winds than a means by which investors can capitalize on companies benefiting from Trump-world policies. As such, MAGA invests primarily in financials (24%), industrials (20%) and energy companies (17%)—all industries whose goals historically have aligned with conventional Republican policies, and whose employees tend to be Republican donors. Whether convention will hold true in Trump’s presidency, however, is anybody’s guess.

At $31 million in assets, MAGA has found some moderate success, but the fund doesn’t come cheap. The ETF carries a 72 basis point expense ratio.

In the equity space, environmental, social and governance (ESG) investing has boomed, yet it still lags in fixed income. To date, only a handful of ESG bond ETFs have hit the market, despite the fact that bonds are a natural fit for investors motivated by the principles of good governance and positive social impact.

Enter the VanEck Vectors Green Bond ETF (GRNB), which offers a completely new take on “green” bonds.

Other fixed-income ESG ETFs evaluate which bonds to include in their portfolios based on the overall characteristics of the company issuing them. GRNB, however, looks to the bonds themselves, allowing investors to put their money where their mouth is and support specific eco-friendly corporate action.

GRNB tracks a basket of bonds issued to finance “green” projects, as identified and certified by the London-based Climate Bonds Initiative. These projects—which span the globe but concentrate in Europe and the U.S.—include low-carbon housing, wind farms, zero-emissions public transports and solar installations. Corporate and sovereign bonds are included, though tax-exempt munis aren’t, and subinvestment-grade bonds are capped at 20% of the portfolio.

So far, the Climate Bonds Initiative has certified some $12.5 billion in bonds from an estimated $895 billion “climate-aligned” bond universe, meaning there’s still plenty of room for the portfolio to grow.

That said, GRNB only has about $11 million in assets, but that could be due to its fee of 0.40%, which is somewhat steep for fixed-income exposure.

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